Center for Local and State Solutions
Neal Peirce Column

Category: Article (Journal or Newspaper)
Jurisdiction: Federal Government, State Government, City/County Government
Management Issues: Budget Systems, Community/Economic Development, Finance
Policy Area: Cities/Counties, Public Works/Infrastructure, Terrorism, Transportation Infrastructure/Transportation
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NEAL PEIRCE COLUMN
November 11, 2001

NATIONWIDE SALES TAX HOLIDAY: A 'COCKAMAMIE IDEA'?

By Neal R. Peirce

WASHINGTON -- Just when the country ought to be getting serious about its economic security, along comes the proposal that Washington decree a 10-day national sales tax holiday, starting the day after Thanksgiving.

States and localities, promised later federal payback, would be free to take or reject the holiday (how, politically, could they refuse?).

The National Retail Federation is red-hot for the idea. A group of senators ranging from Patty Murray (D-Wash.) to Rick Santorum (R-Pa.) have endorsed it. And the White House is reportedly interested. One can easily see the holiday landing up in the economic stimulus bill that's still being debated by Congress.

But Camille Barnett, former city manager of Washington, Austin, Texas, and other cities, tags it a "cockamamie" idea -- "Why take the best shopping days of the year and give away the taxes on them?"

What's more, Barnett suggests, consumers might simply hurry to buy big-ticket items where sales taxes really matter -- autos, furniture and the like -- and then curtail their spending afterwards.

The cost wouldn't be trivial: $6.5 billion out of the federal budget. Barnett also predicts months of payment delay and administrative confusion for states and localities.

The timing's unfortunate -- just when a tidal wave of terrorism-fighting costs is looming. For Washington, that means the war in Afghanistan and maybe elsewhere, purchasing baggage-screening machines, hiring air marshalls, adding FBI agents to track terrorists, finding vaccines and Cipro to deliver nationally, demands for radically increased border controls, more INS agents to track visa offenders -- the list seems truly endless.

View it all from the state and local angle and your alarm simply rises. Most state budgets are already skirting red ink because of sharp revenue drops -- at the very moment states must contend with new security outlays for guarding bridges, nuclear power plants and more.

Cities, in a way, have it even tougher in a nation newly vulnerable to terrorism and the thousands of scare reports it generates.

"911 generates a call to the local police and firefighters -- that's where the response comes from," Oklahoma City Mayor Susan Savage observed on the "News Hour with Jim Lehrer" last week. Atlanta's Mayor Bill Campbell cited "enormous costs associated with the 24-hour around-the-clock security" that cities must now provide.

And the long-term impact, Philadelphia Mayor John Street notes, will go far beyond overtime costs for police, firefighters and medical emergency personnel. Threats such as bioterrorism or nuclear terrorism, he suggests, will force cities to make very new investments in technologies and scientific expertise.

Terrorism-triggered outlays, city by city, are already mounting. Baltimore is facing a prospective $14 million terrorism-defense related deficit. Yet Mayor Martin O'Malley laments that when he and his fellow mayors raise the issue of their new costs with federal officials, "they just roll their eyes, as if we're one more lobby group trying to capitalize on the crisis."

Maybe that explains how Washington politicos and lobbyists could conceive and push, in the midst of national crisis, an unproven "let-the-good-times-roll" idea like a sales tax holiday.

A sounder idea would be to turn a chunk of a national stimulus package into temporary revenue sharing for state and local governments.

Without revenue sharing, says California economist Stephen Levy, we'll likely see states, cities and counties forced to reduce spending, canceling the impact of any national anti-recession efforts. Plus, short-term revenue sharing would help states and localities maintain such services as education and infrastructure, critical for the country's long-term economic prosperity.

"It is an undeniable reality," asserts New Orleans Mayor Marc Morial, president of the U.S. Conference of Mayors, "that the U.S. economy will grow or stall, based on the economic performance of our nation's metropolitan engines" -- the urban areas, with 80 percent of the population, which generated 90 percent of new jobs in the '90s.

The National League of Cities, on a similar tack, is now asking for temporary direct federal help to assist displaced and unemployed workers, plus assistance on imperiled airport bonds and a range of security measures. The cities are especially anxious to see $7 billion or more designated for critically important water and wastewater construction projects that are ready to start construction.

"For every billion dollars we spend on infrastructure improvement projects, 42,000 jobs will be created, helping American families pay the bills and save for the future," says Nevada's Sen. Harry Reid, the Senate Majority Whip.

The bottom line is that the double hit -- recession and terrorism -- requires the federal government, controlling the most flexible and powerful taxing system of all, to provide timely backup for our state and local governments.

The answer may be revenue sharing, or infrastructure help. But finding an answer is critical. After all, the states and cities aren't some other "them" -- they're us.


© 2001 Washington Post Writers Group

Contact Info: Neal Peirce; npeirce@citistates.com
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Source: Neal Peirce Column; Washington Post Newspaper